Two weeks after $70M+ hack, questions linger around the CurveFinance platform's long-term viability and potential contagion risk $CRV DeFi skesslr takes stock of the Curve fiasco in this week’s The Protocol newsletter
– meaning his massive CRV bags are at lower risk of getting liquidated than they were immediately following the hack.
Curve incentivizes liquidity providers to deposit into its pools by rewarding them with CRV tokens atop the regular interest generated from trading fees. The platform offers further rewards to those users who are willing to lock up their CRV in exchange for veCRV – another type of reward. CRV can be locked up for years at a time – the longer the lockup, the bigger the veCRV rewards.
The CRV price has likewise decreased to 60 cents, down from around $6 at its 2022 peak, and down 20% since last month’s hack. “It is kind of like a melting iceberg scenario, where they have to find some way to add or recreate utility for CRV,” said Powell. “Otherwise, there would be no point in having it,” since the rewards for using Curve without CRV – the– is a pittance relative to what users get from CRV bonuses.
While Curve is well-known, Vyper is not. The vulnerability in Vyper drew attention to the myriad avenues by which attackers can theoretically sabotage decentralized systems, and it is possible that the risks will only become greater as the systems powering decentralized systems become more complex.In the months leading up to July’s exploit, Curve founder Michael Egorov took out around $100 million worth of loans. As collateral, he used around $200 worth of CRV – 33% of all CRV in existence.
“I don't necessarily think it's a sign of unethical behavior, but it does open up risks – exactly as you've seen occur – and the risks are not too hard to predict,” remarked Powell. “If you have a $100 million loan, and you have that on leverage, and it's against your token, there's a chance your token could drop in price and you’ll need to liquidate it to cover yourself.
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